Taobao's Shift in Strategy Weakening Absolute Low-Price and Reform of Five-Star Price Power

TapTechNews July 11th news, "36Kr Future Consumption" reported today that Taotian Group held a closed-door meeting for merchants after the end of 618 (at the end of June), and front-line business executives attended and clearly defined several changes, which will be officially implemented in the second half of the year.

Taobaos Shift in Strategy Weakening Absolute Low-Price and Reform of Five-Star Price Power_0

It is pointed out in the report that one of the "core changes" is that Taobao weakened the absolute low-price strategy. The system of search weight distribution according to "Five-star Price Power" since last year has been weakened and changed back to distribution according to GMV (TapTechNews note: the full name is Gross Merchandise Volume, total amount of goods traded). In the first half of this year, the five-star price power of many categories has been cancelled one by one.

"Five-star Price Power" is a price power evaluation system created by Taobao itself: According to the price situation of a single product among the same products inside and outside Taobao, a star rating of 1 to 5 is given to judge whether the single product has an advantage in the entire market price. If the price of the product under this system is lower, the traffic will be higher.

A Taobao insider said, "In the future, the "Five-star Price Power" logic will not be strongly pushed to all merchants, but only let those who are suitable and willing to participate."

Currently, there are mainly two logics for the traffic distribution of e-commerce platforms:

Distribute traffic according to conversion rate (like Pinduoduo): Encourage to exchange low price for a higher number of orders.

Distribute traffic according to GMV (like Taobao): At the same time, unit price is also taken into account.

For example, for a pair of sports shoes worth 500 yuan, with 1000 UVs (Unique Visitors, viewers or independent visitors), the conversion rate is 5%, and the sales amount is 500*5%*1000=25000 yuan. Because 1000 UVs converted 25000 yuan of sales amount, it has a higher ranking on Taobao.

If it is a counterfeit version or "flat substitute" of the same sports shoes with a price of 200 yuan, with 1000 UVs and a conversion rate of 10% (lower price and higher conversion rate), the sales amount is 200*10*1000=20000 yuan. Because 1000 UVs conversion rate reached 10%, it has a higher ranking on Pinduoduo.

Taotian Group CEO Wu Yongming clearly stated at the beginning of this year that GMV should be the first indicator and return to shelf e-commerce. This reform of the Five-star Price Power index is also a specific business action to implement this instruction.